Ladies and gentlemen, good day, and welcome to the Q1 FY 'twenty six Earnings Conference Call of Laurus Lab hosted by DAM Capital. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to mister Nitin Agarwal from DAM Capital. Thank you, and over to you, sir.
Hi. Thanks, Afti. Hi. Good afternoon, everyone, and a very good evening, And welcome to Lotus Labs q one f twenty six earnings call posted by Dan Kaplan Advisors Limited. On the call today, we have representing Lotus Labs management, doctor Satinarayan Shahar, founder and CEO, mister Ravi Kumar and mister executive director and CFO, and mister Vivek Kumar, AVP, investor relations.
I hand over the call to doctor Shahwa to make the opening comments, and we'll open the floor for questions. Please go ahead, sir.
Good afternoon to all our stakeholders. Your company made healthy progress to start the financial year with increasing contribution from CDMO business and continued advancement of our pipeline with big pharma. We're moving ahead with strong focus on commercial execution, realizing the full potential from mid and late stage pipeline programs and rapidly enhancing our service capabilities to meet complex needs of our customers and drive future value creation for our stakeholders.
We announced three major capacity expansions during the quarter one. First one, microbial fermentation Phase one greenfield project at WiSAK second one, gene therapy and antibody drug conjugate GMP facility at Shamir Pate and third one, finished formulation facility in Hyderabad under the Karka joint venture. These investments will create more opportunities for growth and further strengthen our ongoing commitment of being a strong manufacturing partner on some of the new technology platforms at scale. Moving on to our financial results. Our Q1 performance was in line with our expectations with revenues of $15.70 crores, reflecting robust demand for our CDMO offerings and continued growth in the formulation business.
Gross margins further expanded and are at 59% range and EBITDA margins expanded by 10.5 percentage points to close to 25%, following better operating leverage, product and segment mix. As we look forward, we remain confident in our outlook for improved growth in the rest of the year. To begin, I'd like to share key updates on our CDMO business. We are seeing a very good progress in this division with sustained demand in our high value integrated offerings. We achieved very strong growth for the Q1, registering a sales of crores.
This growth was mainly driven by several mid to late stage MCE deliveries and the increase in sales from new manufacturing assets. Pipeline momentum was healthy across clinical commercial phase with the mix shifting to more increased big pharma projects. In specific, a lot of customer interest seen around biocatalysis, flow chemistry, high energy chemistry, controls manufacturing, peptide manufacturing, etcetera. As on date, we have a pipeline of over 110 active projects, over 90 in human health and about 20 in animal health and craft sciences. We continue to invest in our capabilities and commercial offerings in line with what market needs.
Accordingly, additional capacity buildup is in progress, particularly in relation to complex molecules, including peptides. When it comes to Larabio, our large molecule CDMO division, this division reported subdued Q1 sales now for INR29 crores, which was flat year on year. The sales impacted from customer specific scale up challenges. However, we remain focused on building strong diversified pipeline across segment and customers. We have few potential long term partnerships under discussion with the new and existing CDMO partners, utilizing enzyme engineering platform.
As we discussed, construction work for the commercial scale fermentation facility in YZ commenced in this quarter. The plan is to create over 400 kilonewton capacity in Phase one, which is expected to go online by the end of twenty twenty three. We believe the new site will further accelerate on high quality CDMO service capability and growing our industry solution. In generics, the division reported a growth of 12% and achieved a sales of crores. This was mainly supported by volume expansion in both ARV and developed market sales.
We are also seeing the execution of contracts signed last year, which helped the improvement in our capacity utilization. On filings, we filed over 90 DMS till date and also one dose here filed in formulations and three approved received in Q1. Cumulatively, we have filed AGI products. Overall demand outlook largely stable in generics business. Our focus continued on rebalancing the generic R and D and manufacturing resources, mainly to enhance product pipeline and meeting the delivery commitment.
On R and D front, overall R and D spending to sales in Q1 was at 4.3%, which is about INR68 crores for the Q1, which was increased by about 6% year on year. The expenditure including our spend on C6, challenge in tariff. The R and D spend is in line with our full year target and we continue to invest in portfolio with product specific approach based on complexity and scale economy. Besides activating the adaptation of sustainable technology. Let me share brief on quality.
In Q1, the company underwent close to 39 quality audits by multiple regulatory as well as key customers. Company has successfully passed audit inspections without any critical findings. In summary, our technology platform commercial performance today continues to enable meaningful advancement of pipeline projects as well as business development opportunities. We remain confident in our strategic direction and commitment as a source of value creation now and well into the future. With that, I would like to hand it over to Ravi to share some financial highlights.
Thank you, doctor, and very warm welcome to everyone for this quarter one FY 'twenty six earnings call. Total income from operations is INR $15.70 crores with a growth of 31% year on year, and the momentum has come from the CDMO and the generic division business. Gross margin maintained very healthy, 59%, which is more than 4% due to better product mix and process improvement effort. Apart from that, raw material price improvement also. EBITDA per quarter one stands at three eighty nine growth with a margin of 25%, progressively improved versus full year for FY 'twenty five.
Profit after tax for quarter one is $1.63 growth. Growth is stand at 13%, but of course, the continued CapEx investment, which has not improved. So it has improved by 3% for versus FY 'twenty five. On the CapEx trend, we invest close to two sixty five growth for the quarter. Our net debt stood at $2,003.08 88 growth with a debt EBITDA of 1.8 versus 2.3 for the last quarter.
On the capital allocation front, our strategy remains unchanged, and we'll continue prioritizing this month into high value business segments to drive near and long term growth and returns for our shareholders. You can refer our IR presentation for more details. With this, I would request the moderator to open the lines for Q and A. Thank you.
Thank you very much, sir.
We will now begin the question and answer session. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Bharat from Quest for Value. Please go ahead.
Yeah. Hi. First, I'd like to congratulate Bhakti Satya and Ravi for bearing good set of numbers. And I'd also like to especially congratulate Krishna Chitanya for bearing exceptional CDMO numbers consistently from past few quarters. And coming to my question, so there is a significant jump of gross margin this quarter.
It increased by around 500 basis points. We are now at 59.5%. Can we expect this kind of high gross margins will be maintained in future too as the share of CDMO increases? Or do you see it as a one off and it's too early to expect this kind of high gross margin?
Thanks, sir.
You see, if you look at our gross margins over several quarters, we're always informing and also maintaining around 52%. Now we can say as the contribution from CDMO business increases, we expect the gross margins will remain between 55% to 60%. That's what we expect in the coming quarters.
Okay. Thanks.
And if you see of the past trends, CDMO in q one is generally weaker. And as year passes by, q two will be better and q three will be much better and q four will be the top. Yeah. And generally, phase two will be much better than h one. But this time, subsequently, if you see CDMO in q one is very, very strong.
It is even better than last year's q four. Yeah. So on this date, do you still think h two will be better than h one for CDMO in FY twenty six two?
The CDMO business, you can't count quarter on quarter, but we expect good growth over last year for sure. Our manufacturing and delivery depends on their clinical programs.
So it it will be bumpy, but we we see we are in a good shape right now on our CDMO segment.
Okay. Good. Thanks. And my last question is that, currently, if you see the current cycle of Global Fund tender, which is for generally for three years, it is going to end, I think, if I'm not wrong, it will be going to end by December, end of this year in December.
Yeah? May I know if Lotus has won the next tender cycle?
Generally, they will run the tender little later, end of maybe September, October. See, if you see our tender, we are very successful in getting good share of that tender, and we don't see any challenges there.
Okay.
Yes. Thank you. Thank you very much. All the best.
Yes. Thank you.
Thank you. The next question is from the line of Jeevan Patwa from Sahasar Capital. Please go ahead.
Sir, firstly, congratulations for entire team actually for, you know so whatever hardware we have put in in last few years, I think that has started showing the results.
I'm very happy for it. Only question I have is on the bio side, so on the food putting side. So we are basically, you know, about to set up facility for, you know, 2,000,000 liter and then 4,000,000 liter. So on the food putting side, what is the progress, sir? Are we now started putting any work there?
Are we reactors has been orders has been placed for the reactor? Where are we in that?
As I mentioned, given, we are installing 400 kilonewton liters of fermentation capacity in Wijac Greenfield project. That's the Phase one. As you mentioned, overall capacity at that site will go to 2,000,000 liters in two phase two more phases.
In phase two, phase three put together, it will go to 2,000,000 liters. And we have very good visibility about utilization of that fermentation site, which product, which customer and all. Like we are gaining confidence and gaining visibility in our small molecule CDMO segment. We're also seeing a lot of visibility now, what customer, what project, what price, what time line and our large molecule CDM. As you were talking about our focus on food protein, food proteins we are focusing, but focus as also on other proteins, cosmetic proteins, some polymers produced by fermentation.
So the offerings are becoming very interesting, which are also
Wonderful, sir. Wonderful, sir. And second question I have is on the Immuno Ads. So how do you see the ramp up in, you know, number of so capacity, I understand, will come on stream by twenty September.
But in terms of the response from the market, I just wanted to understand your feedback on that. How is the response from the market? Are we also seeing a foreign national traveling to India to get this treatment done? In India, since the cost is much lower.
There are some more treatments offered to foreigners.
That was based on the hospital's child. What is also happening, we are also trying to build overseas presence by entering partnership with some big pharma in those regions. Maybe in the near future, we'll give you more details on our global expansion of CAR T therapy using Immunat.
Okay. Great, sir.
Great. And third, last is on the gene therapy, sir. So we are setting up a viral vector facility in Kanpur. Right? So so any any update there, sir?
So there is a change in our approach because our thought process changed from 2,500 square meter facility to 6,000 square meter facility. So there is no space available at Technopark in Kanpur. So we have moved idea of that facility to Hyderabad, Genome Valley, where we have broke the ground for a 6,000 square meter facility. And whatever gene therapy, viral vector and also drug building houses, antibody drug conjugate GMP facility as well. So because we have added another therapy ADC, we start to move to Hyderabad.
Okay. Okay, sir. Thanks a lot. Thanks a lot.
The next question is from the line of Rahul, an individual investor. Please go ahead.
Hey, thank you for the opportunity and congratulations on the great set of numbers. But, Shala, if you can possibly paint a picture for us, you know, with over the last five years, we've kind of come a long way. And the product mix has changed, and now we see the CDM revenue contributing to 30 plus percent. Last, you know, probably five years ago, it was less than 10%.
At this point, we see the contribution from the biodiesel to be less than 5%. How do you see this product mix changing, you know, five years out and what what is the vision of the company over there? If if you can, you know, share a bit on that, I'd be interested in the listing.
We while we continue to focus on our core, which is APIs and integrated offerings in generics, we are also increasing our investments, CapEx, resources and technology platforms to offer wide variety of services for late clinical and commercial human health, animal health and crop science programs. As we've mentioned, currently, the CDMO contributes over 30% of our revenue.
We expect this will continue to grow. We have in the near future, near to medium to the future, we expect it has a potential to touch 50%. So that's our guesstimate.
Thank you so much. Like just a hypothetical question, at any point in time, do you see these decisions becoming, you know, big to the extent that, you know, the the there may be a possibility of listing these as, you know, separate entities and business?
We don't have any plans for that.
Okay. Thank you so much, wish you all the good luck. Thank you.
Thank you.
The next question is from the line of Chirag Shah from White Pine Investment. Please go ahead.
Please offer the opportunity. Congratulations on good set of numbers. My first question is on gross margins that we have seen.
Would it be right to assume that the gross margin improvement is driven by non CD four business significantly or largely? Because CDMO gross margins would largely be taking a range. Right? Maybe 5% deviation here and there. So would it be a right statement to meet that the sharp increment in gross margin over last six, seven quarters that let's see is driven by a non P and L business, and it would be now almost closer to what we were three years back.
If you look at our quarter on quarter performance, our revenue decline came from ARVs and other generic, whereas there was a growth from CDMO. So I think these two contributed the gross margin expansion. But, sir, what is the right statement that in gross margin in CDMO, your gross margin would reasonably be stable irrespective of the stage of project, whether it's an early stage or late stage, or it materially varies gross margins from the state of the project that you are You are right. The generally, the gross margins remain similar. That's the proper stage and scale of the project.
It's okay. That one. That really answered my question. So and, sir, then in that case, which part of the non CDMO business has been contributing to margin? Because if I do some mathematics, sir, there is a significant improvement of almost 700 to a thousand bits in non series glass margin.
So is it the ARV part or SDF part which is driving or or is it in the shed from, like It's majority came from non ARV. Majority came from non And is that further scope of improvement was there? Or rather, what is driving that on ARV performance?
Based on some shipments, as I mentioned, we expect the gross margins remain between 55 to 60. Earlier, we used to say around 55.
Now we are saying it will be 55 to 60%. So that's very healthy, and we expect we'll be able to maintain that.
Sir, one last question. Any pre buying that you have witnessed or any indication of pre buying given the potential risk of some tariff that could come across? So is there any pre buying that you have witnessed from your customers?
I think it's very difficult question to get an answer because we have to wait. And as you have seen from our results, see, our dependency on formulation sales to U. S. Are not that significant. Yes. Yes.
Great. Thanks, guys.
Thank you. The next question is from the line of Tushar Panudhani from financial services. Please go ahead.
Am I audible?
Yes. Very well.
Sir, just on how that, you know, the animal health facility is commissioned, even agrochemical.
So has this contributed meaningfully for the CDMO business for the quarter? Or the other way to ask is, if you could break the CDMO business into human health, animal health and the agrochemical and increase?
The contributions from human health and animal health were there in this quarter, nothing significant from cost sciences in this quarter.
Will that come up in the coming quarters? Is that the same assumption or it would take some more time to or the security for for that segment?
We expect meaningful revenues from craft centers will only come next financial year. So just no different.
Is it a similar chemistry and hence, it's just a different application or how to think about it, specifically for next five to six years?
The facilities for animal health are segregated and dedicated. You can't use that for human health or craft science.
Similarly, the craft science facilities are also segregated and dedicated. So those can be used for only craft sciences. So interchangeability of these two facilities are not possible. Whereas human health, we have large capacity where we can do these projects in multiple sites at multiple scales.
Understood, sir.
And just lastly on bio side, where there has been certain issues with the customer. So probably, if that customer comes back or if you have new customers, like can there be timeline approximately for this business to sort of revise?
There is no challenge. It's only delay. The project now the bottleneck was resolved, things are back to normal.
And we don't see when we look at the entire year, we don't see any big challenge achieving what numbers we thought at the beginning of the year.
Thank you. The next question is from the line of from Antifragile Thinking. Please go ahead.
Yes. Many thanks for taking my questions. Doctor, progress update you can share regarding the Villo Bio and AI driven bioengineering platform partnership we are progressing with, I mean, what advantages does bioengineering provide over chemical, you know, conventional chemical synthesis in terms of efficiency cost and sustainability, please?
This is what programs we are working with Willow using the AI driven engineering platform, primarily hydroxylation platform. Adding Hydroxy, Bruchsan, Stera Azerul backbone, that's the one we are working. There are multiple programs. Maybe in this financial year, one program will go from lab to pilot mode. And we expect two more programs in the next financial year.
And and do we expect the learnings out of this program to be kind of integrated into some of our future ventures? I mean, because bio is a very emerging promising area, we we are just exploring the possibility of the iceberg.
Our partnership with Billow is primarily meant for steroids and arsenals, where I got the who don't our our Bengal team is doing development, whereas Billo is doing research. I think they are identified the enzyme and then they give it to Bengal team for optimization. So they're working very that partnership is working well. And we we currently, we are not intending to use that technology on any other program right now.
Understood. And thank you for that. Ramiti, this new CapEx investment of over 5,000 crores that we have announced in Andhra Pradesh, I guess, will be executed over multiple phases and years. So, and if my assumption is correct, can we therefore anticipate maintaining a healthy net debt to EBITDA ratio despite this massive growth CapEx?
Yes. As we indicated before, we are going to invest INR 5,000 crores in the next five year time. I think cash flows, internal cash flows will sufficient to take care of it. As we indicate, we don't make our debt net debt is more than 50% of our revenue in any point of time.
Sure. Sure. And finally, in the context of Trump's Make in America, a big pharma is investing heavily in biologics, gene therapies, rate laws, drugs, even diagnostics, and and more to expand, you know, capacity and strengthen their supply chain. So and and many of them from Roche to AstraZeneca to Eli Lilly, almost all of them have announced, you know, multi billion dollar CapEx in The US. So how will these investments by innovators in The US affect the outsourcing and CDMO industry?
These big pharmas have very large pipeline. Maybe part of the supply chain will be located in U. S, part of the supply chain located outside. We have to see how it evolves. Everybody is announcing a lot of investments in U.
S. We don't see a beginning of impact. So as we mentioned, they will not move core chemistry to U. S. They will move cell and gene therapy, finishing steps.
Though the demand for intermediates will remain constant or increasing maybe.
And maybe small molecules API as well, that's not going to move to US.
Yeah. That's what we believe. Yeah. Right.
Yeah.
Yeah. Sure. Sure. That's all from my side. Thank you. Thank you so much.
Thank you.
Thank you. The next question is from the line of Vivek, an individual investor. Please go ahead.
Good evening, sir. I have a question regarding the large buyer, sir. You have mentioned that there is a pricing challenge in that particular site in for the large buyer. Could you please share the details on the pricing challenge? And and the second question is that, what can be the how big it can become in next five to ten years at large buyer sales?
See, the pricing challenge at Bio pertains to hiring reactor months to product billing. So that was the one shift happened. Because in the clinical not clinical trial, since we don't know how many days fermentation will take, how many days the downstream processing happens. So customer is to pay per month or per batch. Once the product stabilizes, then they will the billing will go to per kg.
So that's the pricing shift happening for them when the product mature. The question regarding the opportunities in the next five years, we see significant potential. That is the reason we are investing a lot of money in greenfield projects. As we mentioned, the Phase one itself, we are exceeding 400 kiloliters capacity and eventually it will go to 2,000,000 liters of fermentation capacity.
Okay, sir.
Thank you for answering the question, sir. I'll join in the queue, sir. Thank you.
The next question is from the line of Abhijit, an individual investor. Please go ahead.
Mister Abhijit, your line has been unmuted. Please go ahead with your question.
Yeah. Am I audible?
Audible, Abhijit.
Yeah. Great set of numbers. I have a question with regards to the FBS. If you can see on a quarterly basis, there's been a reduction. Is this the volatility in these numbers have been there for the last four quarters in the presentation.
So is this going to continue? Is there any stability that is going to be there in the generic FBS and generic portfolio? That's one question.
The majority delta in our sales in FDF is coming from how many millions of packs of anti retroviral we're shipping in the quarter. So overall, we're shipping the same number, but depending on the approvals from various countries to ship logistics and all, revenue recognition, because most of them are fee shipments.
So those are the factors contributing to the variation in the generic formulation sales.
Okay. My next question is with regards to this crazy move that everybody is making in India and globally about peptides and the opportunity for GLP-one and weight loss drugs basically and also other peptide products. Is there any opportunity that is available for LORUS also in this case?
We believe so.
Okay. You you don't wanna go more further about it?
Yeah. I mean, you don't want to disclose, I guess. Is that Yeah. Is that correct?
Okay.
Yes.
Thank you. Thank you. Thank you.
You. The next question is from the line of Pankaj Mahajan from Shantam Wealth. Please go ahead.
Sir, congrats for a good set of number.
Sir, can I get a breakup of this 5,000 crore CapEx? How much is going for the CDMO over the next five years?
No, we are not disclose that. It will interchange based on the business opportunity.
Okay. Thank you, sir. Thanks for the call.
The next question is from the line of Vishal from Motilal Resolve. Please go ahead.
Sir, just a housekeeping question on this AirView business, if you could do breakup of formulation and.
Yes. Just give me one minute. We'll give you the API. Yeah. We API is $3.63 crores and formulation is $2.84.
About 640 crores, both the API and formulations could do that. $3.60 and $2.80.
Okay.
So now for this one, ARV formulation, you know, we've seen a bit moderate run rate over past, so this is process if you could We are expanding our capacity for non ARV formulations and which will be qualified by end of this year. So we can expect non ARV formulations to grow from Q4 onwards.
But on the product approval side also there has been a bit, correct me if I'm wrong.
Not our revenue growth primarily comes from contract manufacturing of integrated formulations, both API and FDF. So once the capacity, we were doing tech transfers. Once the capacity is qualified, we don't see lag in revenues.
Got it. Thanks very much.
Thank you. The next question is from the line of from Investment. Please go ahead.
Yes, sir.
Thanks for the opportunity again. And sir, apologies. I'm going back to the gross margin point. So on the non ARV side, would it be a right statement that we are almost at the peak gross margins that we had in the past around 2021? On the non CDMO aggregate gross margin, which could be a function of which, I'm not going to do those details, but non CDMO gross gross margin would be closer to the peak maybe of a '21 or '22 that we had.
Yeah. Yeah. I mean, it's it's a difficult, it may be maybe closer.
We are we are we are right. Maybe closer.
We had a very good gross margin. I'll I'll put it that way.
So Yeah. So my so my actual question is, so what are we doing from here on to improve that part, that piece of gross margin for that business?
As we grow our CDMO business, as we see, today, we haven't achieved operational efficiency, still a lot of unutilized capacities and all.
As we grow our revenues, we are not going to grow our R and D and quality staff proportionately. We are going to increase other expenditure proportionately. If you look at when our revenue was net, cost of employees went up to 17%. It is sometimes it was down 10%. So we have a we are at the beginning of that benefit of Operational.
Operational efficiency. Yeah. Once we improve revenues, our percentage of expenditure will come down. So that is another metric which will help us to improve our numbers, EBITDA as well as return on capital.
Sir, my question was more on the non CDMO gross margin.
Is that is that non is that business mix changing that it can see a significant uptick from what was the historical peak on the gross margin? Because that will directly flow to EBITDA and factor also in that sense. So is the business model changing where we can see a higher peak gross margin in non CDMO peak?
Adi, there is no business mix change. There's only product change.
In some products, we get more margins. Maybe we might have shifted in this quarter. So it is fundamentally the business is not changing Okay, great.
Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.
Mister, thanks for taking the question. Doctor, on, you know, on the the CMO business which we have in both API and formulations, can you give us some color on, you know, we've not you know, when do you see momentum picking up on those pieces?
Because it seems sudden flattening out of the API business in the formulation business, except the others also not seem to pick up much over the last few quarters.
It will pick up from q four onwards, Nitin. Yeah.
And this is driven by certain specific contracts or, you know, what will what will drive the timing from Q4 onwards on this on this?
Right now, the tech transfer batches are going on in formulations.
And capacity enhancement is also going on permanently. So both we expect will be handy to get higher supplies and higher revenue from Q4 onwards.
And just for the APIs?
API, what is happening with that contract, we are doing more integrated. So we are doing making API and converting that into formulations.
So we may not have we don't expect under the contract manufacturing or API revenues will grow. We'll not grow to the extent formulations are growing.
Got it. And sir, on the API business, ex of the ARVs, last year, we had a bit of a slump in the oncology part, I mean, till the time you were disclosing that. I mean, how do we see the non ARV API fees going forward?
Are we seeing momentum coming in that business at some point in time?
Not in the next few quarters.
And then what is the reason because of which there is there has been some challenge on this piece over the last?
It's not a challenge. It's that by size actually.
The reason is we have allocated more resources to take up more CDMO projects in front of allocating to significant number to generic API development. So we took that as a decision made by internal people. I think we are also expanding our R and D strength. Once that is done, we will put resources back in development validation of generic API. We also need capacity to do that.
So there are multiple things. So right now, we made an informed decision internally to allocate resources to CDMO projects.
Okay. That makes sense. And then on the CDMO business, I think the question was asked earlier also.
So because even you've had three very strong consecutive quarters of the business, you know, the growth has come through sequentially for the last few quarters on a q o q basis. Now on this basis, how should we think about quarterly growth for for this business? Is it is it gonna be linear or we expect some lumpiness as we go forward?
The overall, yes, we can comment. It's going to be healthy growth.
Okay. And there's probably some volatility on a on a q o q basis as we go through the quarter.
We are not expanding that because of ARVs, some business we know very clear. See, it's not that we will get an order for CDMO in July and we deliver in September. It's not that.
So it's a long term. We know very clear what molecule we're making, how much we're making, which is the customer or price and all, pretty well for this year. So we see comfortable and we expect good growth in CDM revenues overall for the year.
And sir, if you can on on the on the CDM apart, many products are we supplying? How many have got I guess, this is the commercial supply at this point of time.
And typically, should we think about typically, given your pipeline, how many new products can get commercial typically on annual basis given a pipeline over the next couple of years?
It's it's difficult. We we we don't want to get that number and confuse all the investors. So I think as we have you have mentioned, we have grown significantly in CDMO quarter on quarter for the last five quarters. And numbers only will speak.
That's what we we don't want to forecast our partner products. So when it comes here, we are telling we'll be around INR 2,500 crores plus RMA 200 crores. We have visibility there. In CMO and generic, we have visibility. In CDMO, we don't want to get and give a number.
Got it. And then in your opening last one on this on your opening comments, you made a few references to the fact that a lot of big pharma contracts are supplied has started or are scaling up, you know, for our CDMO business. I mean, so, sir, is this so if you can just probably set on the so, sir, when you highlight the big pharma part, know, how how should one read it? Is it essentially leading to larger contracts or or or these are more strategic partnerships?
And Nitin Nitin, I think we are going I think it's late in the we cannot disclose more than what we have done on the yeah.
Okay, Sure. No problem. Thank you, sir.
Thank you. Thank you.
The next question is from the line of from Bank of Varota. Please go ahead.
Mister, your line has been unmuted. Please go ahead with your question.
Yeah. Thank you for the opportunity, and congratulations on a very good set of numbers. There was one comment made on the CDMO side, which is very big that the contribution is now 30% of the sales, and we expect it to touch 50%. So can you give some more clarity on I mean, by when can we expect this kind of contribution to come in from CDMO?
No. We mentioned we have the potential to go there, and we are not attaching any year to that. Okay. Yeah. Yeah.
But, like, somewhere in five years down the line, can we extend this kind of potential run rate?
We're we're not giving any forecast there.
Okay. And secondly, on the ADC front, we have mentioned couple of times that we endeavor to go into the ADC side also. So may I ask which part of the ADC are we looking at? Is it the payloads, linkers, bioconjugation? Any color on that?
We already make payloads and linkers, and we don't want to make maps. We'll do conjugation, purification and fill finish. That's the infrastructure resources we are building. Internally, we'll make payloads, linkers and then do bioconjugation, purification and fill finish. We will not make math.
Okay. Got it. And out of this 5,000 crore CapEx that we have announced, would it be possible to give some color there, like how much of it would go towards the ADC side?
ADC is will invite this new 5,000 CapEx is in WiZac. None of that CapEx will go to ADC side.
Okay. Got it. Thank you. Thank you.
Thank you. The next question is from the line of Gaurav from Antique Stockbroking. Please go ahead.
Yeah. Hi. Hi. Thank you.
Doctor, good evening.
This quarter, we've seen a significant jump in your employee expenses, almost 23%, 21% quarter on quarter, year on year. Any nonrecurring expenses here or this is the new base?
The part is nonrecurring. In the sense, once in a year you will get, actually we are giving a long term service awards for the people who stayed us for a longer period. And of course, there is an increment over the last year, last quarter, that's also reflected apart from the additional manpower.
So quarter on quarter, we may see some decline in Q2, right, from this I don't say decline, but it will not have that kind of an increase.
We're also expanding our team strength.
So we keep on recruiting more and more to our expanded base. So it will maybe you can consider that as a new norm maybe.
It. Thank you. On the ARV side, we've seen, you know, growth this quarter, year on year growth in this quarter, but you're still maintaining your guidance of, you know, no growth for an overall full year basis.
Any particular reason, you know, why still you're not seeing growth in this segment for the full year? Is it just uncertainty on the global tender?
We kept some margin, see. We have seen significant price drop in ARVs. If there is no price drop, we may go little bit better.
If there is a price drop, our incremental volumes will compensate the price drop. So we are keeping that cushion when we are committing 25 INR plus or minus INR 200 crores. That's the reason we kept that to delta.
Mr. Gaurav, does that answer your question? Hello?
It must be dropped off.
Yes, sir. We'll move on to the next question. It's from the line of Yashir. Please go ahead.
Greetings, sir. You know, what like some qualitative inputs in terms of CDMO business? Is it large volume sort of chronic drug? Is it are they in the rare or orphan space?
Secondly, also, what could be our mix between, say, big pharma and small biotech on the CDMO business?
We can't give you therapeutic mix of our CDMO revenue. Yes. But the majority of revenues are coming from medium and big pharma, very less from small and virtual biotechs. And if you're not audible, Are we the primary source in these cases or are we like, you know, are these projects where, you know, big pharma customers want to diversify the supply and we are probably a a second source, you know, any sort of pricing that could be helpful?
I think those insights are very difficult to divert. I'm sorry.
No. No. No worries. Ten months to your entire deal. Thank you.
Thank you. Yeah.
The next question is from the line of Abhijit, an individual investor. Please go ahead.
Yes. Thank you for the second round of opportunity. I have a question with regards to the debt.
So the net debt for EBITDA right now is 1.8. Obviously, it's come down because your EBITDA has gone up. What is the management's guidance for the debt over the next two years or next three years?
We are not expecting significant increase in the debt. So we will manage in the as we said, we try to manage with 50% of our revenue levels, the annual revenue levels.
That means EBITDA, debt by EBITDA maybe two, two point five is max.
Okay. So two, two point five is the maximum net EBITDA to debt levels. But the INR 5,000 crores that you're going to plan to do in the I presume, next three to four years. Right? You will not do it overnight.
It will take three to four years. Four to five. Four to you're going to okay.
Four to five years, you are going what is the breakup?
Like, are you going to do internal accruals or you're planning to do more JVs with other minor companies or you want to do mostly everything yourself?
Mostly mostly for the from the Laureus Lab side and majority of funding will be through internal approvals.
Okay. And another question is with regards to the business strategy. Are you looking at more opportunity because of this tariff tantrum that is happening around in The U.
S? I know that Lotus does not have a large amount of exposure to The U. S. Market directly apart from the generics. In the other premium more, I would say, complex drug products, is there any opportunity that is coming about?
Are there any meetings going on with the large companies?
No.
No.
Okay. Thank you. Thank you. Best of luck.
Thank you.
Thank you. The next question is from the line of Gavan Tareja from ASK Investment Managers. Please go ahead.
Good evening. Hi. Hope I'm audible.
Yes, you're audible.
Yes. Sir, the first question is on the CDMO piece. Is it possible to understand within CDMO revenue breakdown in terms of what is coming from commercial supplies and what is coming from Phase one, Phase two, Phase three? And how that will evolve over the next two, three years?
We are not dissecting those numbers into commercial Phase III, Phase II, Phase I and customers.
That's we can't divulge customer and product. So afraid we can't give you that data.
Okay. So, okay, the second question is, as the percentage of CDMO in your total sales sizes and since CDMO is a higher gross margin business for you, is it reasonable to assume that it will have, you know, it will take the aggregate or average margin, overall margin or trajectory of the company upward?
Yes.
The contribution and percentage from CDMO gross, we expect both gross margin and EBITDA margins should continue to go up.
Alright. And sir, final one is, on the ARVs, Lena Capraveer and Cavotekawir both have issued voluntary licenses. Even WHO today now seems to stand very strongly behind bringing in lanacapavir, advocating for lanacapavir as as probably the preferred treatment and bringing it in in the emerging markets as well via the voluntary license route. So first question is, would LORUS have an opportunity in lenacaparib?
Are not part of the licensee of lenacaparib. And lamacopril will be part of the guidelines for prevention rather than the treatment. That's one. And cabotegravir, delpivirine, we have developed API, and we have a few partners using our APIs. Lanka, we are not part of the licensee.
Okay. Okay. Thank you, sir. I'll get back in the queue. Thanks for taking my question.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I now hand the conference over to the management for their closing comments. Thank you, Nitin and DAM team for working this Q1 investor conference call. And thanks for asking very pertinent questions, all the stakeholders.
Thank you.
Thank you.
Thank you. On behalf of DAM Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.